978-1285770178 Case Printout Case CPC-02-04 Part 1

C.A.5 (Tex.),2009.

McBeth v. Carpenter

565 F.3d 171 United States Court of Appeals,

Appellants.

No. 07-51305.

April 7, 2009.

Background: Limited partners who deposited $800,000 in escrow for purchase of property brought action against

(1) plaintiffs failed to show lost-profit damages with reasonable certainty;

(2) general partner owed plaintiffs the highest fiduciary duty recognized in the law;

(3) defendant limited partners owed fiduciary duties to plaintiffs;

(4) defendants breached their fiduciary duties to plaintiffs; and

(5) defendants defrauded plaintiffs.

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170BVIII(K)1 In General

170Bk776 k. Trial De Novo. Most Cited Cases

170BVIII(K) Scope, Standards, and Extent

170BVIII(K)1 In General

170Bk763 Extent of Review Dependent on Nature of Decision Appealed from

170Bk765 k. Judgment Notwithstanding Verdict. Most Cited Cases

On review of the district court’s denial of a motion for judgment as a matter of law, the appellate court uses the same

standard to review the verdict that the district court used in first passing on the motion.

[3] Federal Civil Procedure 170A 2608.1

170A Federal Civil Procedure

170AXVII Judgment

170AXVII(E) Notwithstanding Verdict

170Ak2608 Evidence

170Ak2608.1 k. In General. Most Cited Cases

157XIV Weight and Sufficiency

157k595 k. Inferences from Evidence. Most Cited Cases

A jury may draw reasonable inferences from the evidence, and those inferences may constitute sufficient proof to

support a verdict.

170Bk841 k. Extent of Review in General. Most Cited Cases

Federal Courts 170B 843

170B Federal Courts

[6] Federal Courts 170B 842

170B Federal Courts

170BVIII Courts of Appeals

Federal Courts 170B 844

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170BVIII(K)5 Questions of Fact, Verdicts and Findings

170B Federal Courts

170BVI State Laws as Rules of Decision

170BVI(A) In General

170Bk373 k. Substance or Procedure; Determinativeness. Most Cited Cases

A federal court sitting in diversity applies state substantive law.

Limited partners in partnership created to purchase property failed to show lost-profit damages with reasonable cer-

tainty arising from failure to complete the sale, as required to recover such damages under Texas law; although gen-

eral partner subsequently purchased property with different investors and sold it for a profit, this later purchase of

the property was based on different terms, included more acreage, more capital infusion, and less leverage than the

original sales provisions.

115k190 k. Loss of Profits. Most Cited Cases

In Texas, lost profit damages must be established with reasonable certainty.

Under Texas law, lost profit damages may not be based on evidence that is speculative, uncertain, contingent, or

hypothetical.

[12] Damages 115 6

[13] Partnership 289 366

289 Partnership

289VIII Limited Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

289 Partnership

289VIII Limited Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

Texas law recognizes fiduciary obligations between limited partners, applying the same partnership principles that

govern the relationship between a general partner and limited partners.

Texas law recognizes damages awards for breach of fiduciary duties owed by limited partners.

[16] Partnership 289 366

289 Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

Under Texas law, general partner and entities that were limited partners in partnership formed to purchase property

eral partner’s control.

[22] Partnership 289 366

289 Partnership

ing the deal, property purchase was delayed and ultimately scuttled due to the ongoing water rights negotiations,

individual limited partners would not have entered the partnership agreement if they had known the full extent of the

property’s water rights issues, they relied on general partner’s representations that the water rights dispute would not

delay the purchase in making their investment decision, and entities that were limited partners operated under gen-

eral partner’s control.

184k3 k. In General. Most Cited Cases

To establish fraud under Texas law, a plaintiff must prove that: (1) the defendant made a material representation that

was false; (2) it knew the representation was false or made it recklessly as a positive assertion without any

knowledge of its truth; (3) it intended to induce the plaintiff to act upon the representation; and (4) the plaintiff actu-

ally and justifiably relied upon the representation and thereby suffered injury.

184k17 k. Duty to Disclose Facts. Most Cited Cases

As a general rule, a failure to disclose information does not constitute fraud under Texas law unless there is a duty to

disclose the information.

[25] Fraud 184 17

184 Fraud

170Bk765 k. Judgment Notwithstanding Verdict. Most Cited Cases

On review of the district court’s denial of a motion for judgment as a matter of law, the appellate court uses the same

standard to review the verdict that the district court used in first passing on the motion.

[3] Federal Civil Procedure 170A 2608.1

170A Federal Civil Procedure

170AXVII Judgment

170AXVII(E) Notwithstanding Verdict

170Ak2608 Evidence

170Ak2608.1 k. In General. Most Cited Cases

157XIV Weight and Sufficiency

157k595 k. Inferences from Evidence. Most Cited Cases

A jury may draw reasonable inferences from the evidence, and those inferences may constitute sufficient proof to

support a verdict.

170Bk841 k. Extent of Review in General. Most Cited Cases

Federal Courts 170B 843

170B Federal Courts

[6] Federal Courts 170B 842

170B Federal Courts

170BVIII Courts of Appeals

Federal Courts 170B 844

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170BVIII(K)5 Questions of Fact, Verdicts and Findings

170B Federal Courts

170BVI State Laws as Rules of Decision

170BVI(A) In General

170Bk373 k. Substance or Procedure; Determinativeness. Most Cited Cases

A federal court sitting in diversity applies state substantive law.

Limited partners in partnership created to purchase property failed to show lost-profit damages with reasonable cer-

tainty arising from failure to complete the sale, as required to recover such damages under Texas law; although gen-

eral partner subsequently purchased property with different investors and sold it for a profit, this later purchase of

the property was based on different terms, included more acreage, more capital infusion, and less leverage than the

original sales provisions.

115k190 k. Loss of Profits. Most Cited Cases

In Texas, lost profit damages must be established with reasonable certainty.

Under Texas law, lost profit damages may not be based on evidence that is speculative, uncertain, contingent, or

hypothetical.

[12] Damages 115 6

[13] Partnership 289 366

289 Partnership

289VIII Limited Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

289 Partnership

289VIII Limited Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

Texas law recognizes fiduciary obligations between limited partners, applying the same partnership principles that

govern the relationship between a general partner and limited partners.

Texas law recognizes damages awards for breach of fiduciary duties owed by limited partners.

[16] Partnership 289 366

289 Partnership

289k366 k. Relation Between Partners in General. Most Cited Cases

Under Texas law, general partner and entities that were limited partners in partnership formed to purchase property

eral partner’s control.

[22] Partnership 289 366

289 Partnership

ing the deal, property purchase was delayed and ultimately scuttled due to the ongoing water rights negotiations,

individual limited partners would not have entered the partnership agreement if they had known the full extent of the

property’s water rights issues, they relied on general partner’s representations that the water rights dispute would not

delay the purchase in making their investment decision, and entities that were limited partners operated under gen-

eral partner’s control.

184k3 k. In General. Most Cited Cases

To establish fraud under Texas law, a plaintiff must prove that: (1) the defendant made a material representation that

was false; (2) it knew the representation was false or made it recklessly as a positive assertion without any

knowledge of its truth; (3) it intended to induce the plaintiff to act upon the representation; and (4) the plaintiff actu-

ally and justifiably relied upon the representation and thereby suffered injury.

184k17 k. Duty to Disclose Facts. Most Cited Cases

As a general rule, a failure to disclose information does not constitute fraud under Texas law unless there is a duty to

disclose the information.

[25] Fraud 184 17

184 Fraud